Consumer Duty Update

There are now less than 6 months to go until the new FCA rules on consumer duty come in to effect, how are your preparations going ?

In January the FCA published their findings from a review in to firms plans and stated:   

“Many of the plans we reviewed showed that firms have understood and embraced the shift to focus on consumer outcomes, established extensive programmes of work to embed the Duty, and are engaging with the substantive requirements,”

However, they also noted that:

“We did also identify plans that suggested some firms may be further behind in their thinking and planning for the Duty. This brings a risk that they may not be ready in time, or they may struggle to embed the Duty effectively throughout their business”. 

If the second quote applies to you, then the question to ask yourself as a business is “Who is responsible for it” and “How is the Consumer Duty going to be embedded into my firms’ culture approach”.

A new individual “Conduct Rule 6” is also to be introduced to reflect the new standard of duty. It requires all conduct rules staff to ‘act to deliver good outcomes for retail customers’ where the activities of the firm fall within the scope of the Duty.

There is no doubt that these new rules are a major focus for the FCA, and I understand they are ready to take swift action against any firm or individual failing to comply with them.

The higher standards of the Duty and the shift to focusing on consumer outcomes may require a significant change in many firms ‘culture.

Do you need any assistance? If so, we can help.

Just to recap, in essence the rules aim to:

• Raise standards.
• Reduce poor conduct.
• Increase consumer confidence in advice.

There are three overarching and cross-cutting rules.

• Act in good faith towards retail customers
• Avoid foreseeable harm to retail customers
• Enable and support retail customers to pursue their financial objectives

The new rules will undoubtedly result in a lot more customer contact which will need to be structured, recorded, and designed to help customers achieve their financial goals

IFAs will need to understand the characteristics of customers in their relevant target market and also their degree of financial sophistication, the sale of products should take this in to consideration creating friction in the sales process where it is deemed necessary.

Support to achieve a customer’s financial goals will have to be supplied throughout a product lifetime and be of a similar amount to that supplied when a product was first purchased. This implies much greater emphasis on data collection, management, and presentation for interrogation by the regulator.

As I have mentioned before, none of these new rules needs to be difficult to implement, our consultancy service has always championed innovative ways to help IFAs, save time and effort.

We can help you with any aspect of the requirements without interfering with any existing arrangements, also none of our suggestions involve expensive changes to IT systems.

Our offer a of a free consultancy meeting is still available, as is our “Consumer Duty Framework” which we can provide for a fixed price fee.

To discuss your situation in confidence, and disciber how our Consultancy Department can help you, please contact me directly